July 3, 2023
Every subrogation attorney knows that to subrogate means the carrier is “stepping into the shoes” of the insured to recover amounts paid out on a loss. Attorney relationships with adversaries and experts are pretty straightforward, but how do you navigate the unique relationship with the insured during the course of a subrogation claim? They are technically not your client, but as counsel for their carrier, you still have an important relationship since you are stepping into their shoes to pursue recovery. The extent of the insured party’s involvement in a subrogation claim can vary wildly depending on a number of factors, including, but not limited to, the carrier, the type of policy, and the jurisdiction. No matter the situation, it is important to keep that relationship a positive one.
Depending on the type of loss, the insured may have little to no involvement. Other times, your insured may want to be frequently updated as the claim progresses. For the most part, it’s a good idea to let your insured set the tone for the extent of involvement. Being respectful of their time and relationship with their carrier is always a priority, so a certain degree of finesse is key. Not every insurance policy is the same, but many times there is language that requires cooperation with the carrier for the purposes of subrogation. Sometimes there is a deductible at play, other times there is not. Some deductibles are nominal, others can be over $10,000. If an insured has a massive deductible, they are likely to be very cooperative. However, if there is no deductible for your particular claim, you may run into difficulty getting the insured to respond. After all – what is in it for them? Establishing a positive relationship early on can make the whole process much smoother.
Consider also whether the insured has additional out of pocket expenses beyond what was paid by the carrier. Before filing suit or settling a claim, it is a good idea to confirm with the insured whether they are seeking out-of-pocket expenses. Perhaps they are represented by separate counsel. Alternatively, if their out-of-pocket loss is substantiated, it is sometimes feasible to do a joint prosecution agreement and seek the carrier’s subrogation claim in tandem with the insured’s out-of-pocket claim.
Many claims resolve without the need to involve the insured, beyond an initial introduction, and the occasional update. If the loss just happened, the insured’s cooperation in preserving the evidence can be extremely important as it can make or break your whole claim. If the evidence is still located at the insured property, the insured is the one who can best keep it safe until such time as your expert can inspect it or it is transferred to storage. Your insured can also be helpful in providing details for a cause and origin investigation such as what they saw, what they heard, what they smelled or who they talked to, that can shed light on the area of origin in a vehicle fire, potential witnesses to a car crash, or how long a pipe was leaking before it was discovered. Since the insured is often the person or entity with the most detailed account of the loss, including the timeline, the potential wrongdoers, service documentation, photographs and other vital information, they could be in possession of useful information they may not have even thought to provide to the carrier.
Next, if you come to the point of filing suit or arbitration, the insured party’s involvement could become crucial. If you are headed towards arbitration, you will likely need to obtain a signed statement in support. When and how you use your insured’s statements in support of your claim depends on the type of claim and what path of resolution you are on. If your path involves litigation, it’s likely the insured will be deposed or ultimately testify at trial. Even an insured who gives you a detailed account of the loss can surprise you by being a poor witness during deposition by not testifying to what they recall, testifying differently than what they previously stated, or by refusing to answer a line of questioning. Prior to getting them on the stand, you want to make sure you know what kind of witness they will make and what kind of information they have.
Some policies require a written assignment of rights to the carrier before filing a subrogation lawsuit. Other polices have language where the transfer of that right is automatic following payment of a loss. The cooperation of your insured is imperative because if an assignment is necessary, you may not have standing to file suit without it. Does your jurisdiction recognize a “Made Whole” doctrine? If so, the amount of the insured’s deductible and their out-of-pocket claim can affect the timeline of your lawsuit, so it is important to obtain those details up front.
The most important part of stepping into the insured’s shoes involves realizing they have suffered a loss and are probably frustrated. The key is to gently let them know their help is important without being too pushy. If you establish a strong rapport, you’re more likely to get the information you need. You want the insured to know that you are on their side, but also be mindful that you represent their carrier, and not them as the insured (unless you are jointly prosecuting their out-of-pocket claim). Your interests will run parallel but will not always align perfectly. In sum, navigating the unique relationship between subrogation attorney and insured can be tricky, but if you can establish a positive dynamic from the start, the process can be a positive experience for everyone.